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BROADWING INC.
1997 LONG TERM INCENTIVE PLAN
(As amended and restated effective as of July 24, 2000)
1. PURPOSE.
1.1 The purpose of this plan, which shall be named the Broadwing Inc.
1997 Long Term Incentive Plan (the "Plan") and the sponsor of which is the
Company (as defined in subsection 1.3 below), is to further the long term growth
of the Company by offering competitive incentive compensation related to long
term performance goals to those salaried employees of the Company and its
Subsidiaries (as defined in subsection 1.3 below) who will be largely
responsible for planning and directing such growth.
1.2 The Plan is also intended as a means of reinforcing a commonality
of interest between the Company's shareholders and the employees who are
participating in the Plan and as an aid to the Company and its Subsidiaries in
attracting and retaining employees of outstanding abilities and specialized
skills.
1.3 For purposes of the Plan, "Company" refers to Broadwing Inc.
(which, prior to April 20, 2000, was named Cincinnati Bell Inc.) or, if
applicable, any corporate successor to Broadwing Inc. that results from a merger
or similar transaction. Also, for purposes of the Plan, a "Subsidiary" refers to
any corporation which is part of an unbroken chain of corporations that begins
with the Company and in which each corporation in such chain, other than the
Company, has at least 80% of the total combined voting power of all classes of
its stock owned by the Company or one of the other corporations in such chain.
In addition, for purposes of the Plan, the Company's "Subsidiaries" refers to
each and every Subsidiary in the aggregate.
1.4 This document amends and restates the plan that was named the
Broadwing Inc. 1997 Long Term Incentive Plan and all predecessor versions of
such plan (the "Prior Plan") effective as of July 24, 2000 (the "Effective
Amendment Date") and does not affect any awards granted under the Prior Plan
prior to such date. For all purposes hereof, however, where the context permits,
any reference to the Plan contained herein refers to the Plan both as amended
and restated by this document and to the Prior Plan as it was in effect from
time to time prior to the Effective Amendment Date.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board"). The Committee
shall consist of at least three members of the Board (a) who are neither
officers nor employees of the Company, (b) who are "Non-Employee Directors"
within the meaning of Rule 16b-3 (as in effect on the Effective Amendment Date
or as it may thereafter be amended or renumbered) as issued pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and (c) who are
"outside directors" within the meaning of Section 162(m)(4)(C) (as in effect on
the Effective
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Amendment Date or as it may thereafter be amended or renumbered) of the
Internal Revenue Code of 1986, as amended (the "Code").
2.2 Subject to the limitations and other provisions of the Plan, the
Committee shall have the sole and complete authority (a) to select, from the
employees of the Company and its Subsidiaries who are part of the class of
employees eligible for awards under the Plan, those employees who shall
participate in the Plan (the "Participants"), (b) to make awards to each and any
Participant in such forms and amounts as it shall determine and to cancel,
suspend, or amend any such awards (except that it may not amend any award that
without such amendment would not be subject to the deduction limits of Section
162(m)(1) (as in effect on the Effective Amendment Date or as it may thereafter
be amended or renumbered) of the Code if such amendment would cause such award
to be subject to such deduction limits), (c) to impose such limitations,
restrictions, and conditions upon awards as it shall deem appropriate, (d) to
interpret the Plan and to adopt, amend, and rescind administrative guidelines
and other rules and regulations relating to the Plan, (e) to appoint certain
employees of the Company and its Subsidiaries to act on its behalf as its
representatives (including for purposes of signing agreements which reflect
awards granted under the Plan), and (f) to make all other determinations and to
take all other actions necessary or advisable for the proper administration of
the Plan. The Committee's determinations on any matter within its authority
shall be conclusive and binding on the Company, its Subsidiaries, all
Participants, and all other parties.
2.3 Notwithstanding any other provision of the Plan which may be read
to the contrary, the Committee may set different terms and conditions applicable
to each and any award granted under the Plan, even when such awards are of the
same type and even when issued to the same Participant. In addition, and also
notwithstanding any other provision of the Plan which may be read to the
contrary, the Committee may grant to any Participant for any period any specific
type of award available under the Plan without being required to grant to the
Participant for such period any other type of award that may be available under
the Plan.
2.4 The Committee may delegate to one or more Senior Managers of the
Company and its Subsidiaries or to one or more committees of Senior Managers of
the Company and its Subsidiaries its right to make awards to employees who are
part of the class of employees eligible for awards under the Plan but who are
not officers or directors of the Company, are not otherwise considered by the
Company to be "officers" of the Company within the meaning of Section 16 (as in
effect on the Effective Amendment Date or as it may thereafter be amended or
renumbered) of the 1934 Act (or other persons who are subject to the
requirements of such Section 16 of the 1934 Act), and are not "covered
employees" within the meaning of Section 162(m)(3) (as in effect on the
Effective Amendment Date or as it may thereafter be amended or renumbered) of
the Code. To the extent the Committee's right to make awards to such employees
is so delegated, then any reference to the Committee in the other provisions of
the Plan that concern the making of awards to such employees, the terms of such
awards, and the verification that all conditions applicable to the payment under
or the exercise of such awards have been met shall be read to refer to the
Senior Managers or committees of Senior Managers to whom the authority to make
such awards is delegated as if they were the Committee.
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3. CLASS OF EMPLOYEES ELIGIBLE FOR PLAN.
Awards may be granted under the Plan to, and only to, salaried
employees. For purposes of the Plan, a "salaried employee" refers to any person
who is employed and classified as an employee by the Company or a Subsidiary of
the Company, whose pay is based on a monthly or annual rate, and whose position
is not subject to automatic wage progression. As is indicated in Section 2
above, the specific salaried employees to whom awards will be granted under the
Plan, and who thereby will be considered Participants under the Plan, shall be
chosen by the Committee in its sole discretion (or, with respect to salaried
employees who are not officers or directors of the Company and as to whom the
right to grant awards to under the Plan may be delegated to any Senior Managers
or committees of Senior Managers under the provisions of subsection 2.4 above,
by any Senior Managers or committees of Senior Managers who are delegated by the
Committee the right to select such persons for Plan awards).
4. TYPES OF AWARDS.
4.1 Awards under the Plan may be granted in any one or more of the
following forms, all of which shall be based on common shares of the Company,
$0.01 par value ("Common Shares"): (a) stock options, including incentive stock
options within the meaning of Section 422 (as in effect on the Effective
Amendment Date or as it may thereafter be amended or renumbered) of the Code
("ISOs"), (b) stock appreciation rights ("SARs"), (c) restricted stock, and (d)
performance shares and/or performance units. The subsequent provisions of the
Plan provide certain rules and conditions that apply to each of such award
forms.
4.2 For purposes hereof, an award granted under the Plan shall be
deemed to be based on Common Shares if, and only if, the award provides for a
payment (upon, if applicable, its exercise or the meeting of certain performance
goals or other criteria or conditions) of a certain number of Common Shares or
of an amount determined with reference to the fair market value (or the change
in fair market value over a period of time) of Common Shares.
4.3 Further, in the discretion of the Committee, payments may also be
made in connection with any award granted under the Plan of dividends payable
with respect to the Common Shares on which the award is based, of an amount
equivalent to such dividends, or of an amount determined by applying an interest
rate or rates to the principal amount of the award.
4.4 No awards shall be granted under the Plan after April 27, 2007 (the
"Plan's Grant Termination Date"), which is the last day of the ten year period
that began on the date that the Plan was originally approved by the shareholders
of the Company.
5. SHARES SUBJECT TO PLAN AWARDS.
5.1 Subject to the provisions of subsections 5.2 through 5.5 below and
Section 14 below, the following limits shall apply to the grant of awards under
the Plan:
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(a) The maximum number of Common Shares on which awards
granted under the Plan to all Participants during the period (the "Remaining
Period of the Plan") which began on January 1, 2000 and ends on the Plan's
Grant Termination Date may be based shall be equal to 50,000,000 Common
Shares (which number of shares is substantially equal to the limit on the
maximum number of Common Shares that would apply during the Remaining Period
of the Plan if both the terms of the Plan as originally adopted and the
number of the Common Shares outstanding as of January 1, 2000 never changed);
(b) The maximum number of Common Shares on which awards
granted under the Plan to all Participants during each calendar year that
began or begins in the Remaining Period of the Plan may be based shall be
equal to the sum of: (1) 4,200,000 (which number is approximately equal to 2%
of the number of Common Shares which were outstanding as of January 1, 2000);
and (2) the difference between the maximum number of Common Shares on which
awards could have been granted in the immediately preceding calendar year
under the terms of the Plan then in effect and the number of Common Shares on
which awards were or are actually granted in such immediately preceding
calendar year under the Plan;
(c) The maximum number of Common Shares on which awards
under the Plan to any Participant during each and any calendar year that
began or begins in the Remaining Period of the Plan may be based shall be
1,000,000 Common Shares; and
(d) The maximum number of Common Shares on which ISOs
granted under the Plan to all Participants during the Remaining Period of the
Plan may be based shall be equal to 12,500,000 Common Shares (which number is
equal to 25% of the maximum number of Common Shares on which awards granted
under the Plan to all Participants during the Remaining Period of the Plan
may be based).
5.2 Any limit on the maximum number of Common Shares on which awards
granted under the Plan may be based that is set forth in subsection 5.1 above
or elsewhere in the Plan, regardless of whether it is a limit applicable to
all Participants or a limit as to any Participant and regardless of whether
it is a limit applicable to the Remaining Period of the Plan or a limit as to
a more limited period, shall apply both (a) to each specific form of award
available under the Plan and (b) also in the aggregate to all possible forms
of awards that can be granted under the Plan, except to the extent the
provision of the Plan that sets forth such limit expressly indicates that it
applies to a specific form of award. (For example, the limit set forth in
subsection 5.1(c) above as to the maximum number of Common Shares on the
basis of which awards may be granted under the Plan to any Participant during
any calendar year that begins in the Remaining Period of the Plan shall be a
limit that applies to any specific form of award that may be granted under
the Plan to a Participant as well as an aggregate limit on all forms of
awards that may be granted to the Participant under the Plan.)
5.3 Any Common Shares that are deliverable under any award granted
under the Plan may consist, in whole or in part, of Common Shares that are
authorized but unissued or Common Shares that are treasury shares.
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5.4 If any award or portion of an award granted under the Plan on or
after January 1, 2000 is forfeited, expires, or in any other manner
terminates without the payment of Common Shares or any other amount or
consideration, the Common Shares on which such award or portion of an award
was based shall again be available to be the basis on which other awards may
be granted under the Plan but shall be counted only once in determining
whether any of the limits set forth in subsection 5.1 above (except for the
limit set forth in paragraph (c) of subsection 5.1 above) is met. However, if
any award or portion of an award granted under the Plan prior to January 1,
2000 is forfeited, expires, or otherwise terminates on or after January 1,
2000 without the payment of Common Shares or any other amount or
consideration, the Common Shares on which such award or portion of an award
was based shall not again be available to be the basis on which other awards
may be granted under the Plan.
5.5 If, after January 1, 2000, any corporation is acquired by the
Company and the Company assumes certain stock-based awards previously granted
by such acquired corporation or issues new awards in substitution for such
previously-granted awards of the acquired corporation, then, except to the
extent expressly provided by action of the Board, the awards so assumed or
issued by the Company shall not be deemed to be granted under the Plan and
any Common Shares that are the basis of such assumed or substituted awards
shall not affect the number of Common Shares on which awards granted under
the Plan can be based.
6. STOCK OPTION AWARDS.
Any awards granted under the Plan in the form of stock options shall
be subject to the following terms and conditions:
6.1 The Committee may, from time to time and subject to the
provisions of the Plan and such other terms and conditions as the Committee
may prescribe, grant to any Participant options to purchase Common Shares,
which options may be ISOs, options that are not ISOs, or both ISOs and
options that are not ISOs.
6.2 Subject to the other provisions of this Section 6, the terms and
conditions of any stock option granted under the Plan shall be determined by
the Committee. The grant of an option shall be evidenced by a written
agreement signed by the Committee or a representative thereof, which
agreement shall contain the terms and conditions of the option (as set by the
Committee).
6.3 The purchase price per Common Share under any stock option
granted under the Plan shall be determined by the Committee but shall not be
less than 100% of the fair market value of a Common Share on the date the
option is granted.
6.4 Unless otherwise prescribed by the Committee, any stock option
granted under the Plan shall expire and no longer be exercisable ten years
after the date on which it is granted and shall be exercisable in whole or in
part after but not before the expiration of one year after the date on which
it is granted.
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6.5 Subject to the other provisions of the Plan, the Committee shall
establish procedures governing the exercise of stock options granted under
the Plan (and shall require under such procedures, with respect to each
exercise of a stock option, that written notice of the exercise be given and
that the purchase price for the Common Shares being purchased upon the
exercise and any taxes required to be withheld upon the exercise be paid in
full at the time of the exercise). As soon as administratively practical
after the receipt of the written notice and full payment applicable to the
exercise of any stock option granted under the Plan, the Company shall
deliver to the applicable Participant (or such other person who is exercising
the stock option) a certificate or certificates representing the acquired
Common Shares.
6.6 To the extent that the aggregate fair market value of Common
Shares with respect to which stock options intended to be ISOs are
exercisable for the first time by any Participant during any calendar year
(under the Plan and all other plans of the Company and its Subsidiaries)
exceeds $100,000 (or, if such limit amount is amended under Section 422 of
the Code, such amended limit amount), such stock options shall be treated as
if they were not ISOs. The rule set forth in the immediately preceding
sentence shall be applied by taking options into account in the order in
which they were granted. Also, for purposes of the rules of this subsection
6.6, the fair market value of any Common Shares which are subject to a stock
option shall be determined as of the date the option is granted.
6.7 Notwithstanding any other provision of the Plan to the contrary,
no person shall be eligible for or granted an ISO under the Plan if, at the
time the applicable ISO is otherwise to be granted, the person owns more than
10% of the total combined voting power of all classes of stock of the Company
or any of its Subsidiaries. For purposes hereof, a person shall be considered
as owning the stock owned, directly or indirectly, by or for his or her
brothers or sisters (whether by the whole or half blood), spouse, ancestors,
and lineal descendants, and stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries.
7. STOCK APPRECIATION RIGHT AWARDS.
Any awards granted under the Plan in the form of SARs shall be
subject to the following terms and conditions:
7.1 A SAR may be granted free-standing, in relation to a new stock
option being granted at the same time as the SAR is granted, or in relation
to a stock option both which is not an ISO and which has been granted prior
to the grant of the SAR. The SAR shall represent the right to receive payment
of a sum not to exceed the amount, if any, by which the fair market value
(determined as of the date on which the SAR is exercised) of the Common
Shares with respect to which the SAR is based exceeds the grant price of the
SAR (as is determined under the provisions of subsection 7.2 below).
7.2 The grant price of a SAR shall not be less than the fair market
value (determined as of the date on which the SAR is granted) of the Common
Shares with respect to which the
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SAR is based. Subject to the immediately preceding sentence, the grant price,
and the other terms and conditions of a SAR, shall be determined by the
Committee.
7.3 A SAR granted under the Plan shall be evidenced by a written
agreement signed by the Committee or a representative thereof, which
agreement shall contain the terms and conditions of the SAR (as set by the
Committee).
7.4 Subject to the other provisions of the Plan, the Committee shall
establish procedures governing the exercise of SARs granted under the Plan
(and shall require under such procedures, with respect to each exercise of a
SAR, that written notice of the exercise be given and that any taxes required
to be withheld upon the exercise be paid in full at the time of the
exercise). Payment of the amount to which a Participant is entitled upon the
exercise of a SAR shall be made in cash, Common Shares or other property, or
a combination thereof, as the Committee shall determine and permit in its
issuance of the award. To the extent that payment is made in Common Shares or
other property, the Common Shares or other property shall be valued at its
fair market value on the date of exercise of the SAR.
7.5 Unless otherwise determined by the Committee, any stock option
as to which a SAR is related shall no longer be exercisable to the extent the
SAR has been exercised and the exercise of a stock option shall cancel any
related SAR to the extent of such exercise.
8. RESTRICTED STOCK AWARDS.
Any awards granted under the Plan in the form of restricted stock
shall be subject to the following terms and conditions:
8.1 Restricted stock shall constitute Common Shares that may not be
disposed of by the Participant to whom the restricted stock is granted until
certain restrictions and conditions established by the Committee lapse. Such
restrictions, and any other conditions of the restricted stock, shall be set
forth in a written agreement signed by the Committee or a representative
thereof, which agreement shall be referenced on the certificates representing
the Common Shares that constitute such restricted stock.
8.2 It is anticipated that the only restrictions to be set by the
Committee as to the ability of a Participant to dispose of any restricted
stock granted to him or her under the Plan (and/or as to any dividends or
other rights issued with respect to such stock) shall require the Participant
to be an employee of the Company and/or a Subsidiary of the Company for a
specified continuous period of time or to terminate employment with the
Company and its Subsidiaries in special circumstances (such as, as may be set
by the Committee, the Participant's retirement, disability, or death).
However, the Committee may, in its sole discretion, apply other types of
restrictions as to the ability of the Participant to dispose of any
restricted stock granted to him or her under the Plan (and/or as to any
dividends or other rights issued with respect to such stock), including but
not limited to the meeting of certain performance goals.
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8.3 Subject to the other provisions of the Plan, the Committee shall
establish procedures that require any taxes required to be withheld upon the
lapse of any restrictions applicable to any restricted stock granted under
the Plan (and, if applicable, any minimum purchase price for the restricted
stock that may be required by applicable law) to be paid in full.
8.4 Any Participant who has been granted restricted stock under the
Plan shall have, during the period in which restrictions on his or her
ability to dispose of such stock apply, all of the rights of a shareholder of
the Company with respect to the Common Shares awarded as restricted stock
(other than the right to dispose of such shares), including the right to vote
the shares and the right to receive any cash or stock dividends, unless the
Committee shall otherwise determine in the grant of the restricted stock and
except as may otherwise be provided in subsection 8.5 below.
8.5 Any Common Shares issued with respect to restricted stock as a
result of a stock split, stock dividend, or similar transaction shall be
restricted to the same extent as the applicable restricted stock, unless
otherwise determined by the Committee.
8.6 If a Participant to whom restricted stock has been granted under
the Plan terminates his or her employment with the Company and its
Subsidiaries during the period in which restrictions on his or her ability to
dispose of such stock apply (and prior to the satisfaction of the
requirements applicable to such restrictions), such restricted stock shall be
forfeited (subject to such exceptions, if any, as are authorized by the
Committee as to a termination of employment that reflects a retirement,
disability, death, or other special circumstances).
9. PERFORMANCE SHARE AND UNIT AWARDS.
Any awards granted under the Plan in the form of performance shares
and/or performance units (collectively, "Performance Awards") shall be
subject to the following terms and conditions:
9.1 Any award to a Participant of a performance share shall provide
that he or she will receive one Common Share if certain performance goals
that are set by the Committee (and any other conditions, which may include a
requirement that the Participant be an employee of the Company and/or a
Subsidiary of the Company for a specified continuous period of time, that are
set by the Committee) are met.
9.2 Any award to a Participant of a performance unit shall provide that
he or she will receive an amount that is equal to a percent, not more than 200%,
of the fair market value of one Common Share on the date such amount becomes
payable under the terms of the unit (or is equal to a percent, not more than
200%, of the increase in the fair market value of one Common Share from the date
of the grant of the unit to the date such amount becomes payable under the terms
of the unit) if certain performance goals that are set by the Committee (and any
other conditions, which may include a requirement that the Participant be an
employee of the Company and/or a
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Subsidiary of the Company for a specified continuous period of time, that are
set by the Committee) are met.
9.3 The Committee may, in its discretion and on such conditions as
the Committee may determine, grant more than one performance share and/or
performance unit to any Participant under the same award and provide that the
satisfaction of certain but not all (or a certain level but not the highest
level) of the performance goals (and/or other conditions) set by the
Committee with respect to such award will permit the Participant to receive a
portion, but not the maximum amount, of the Common Shares or the amounts that
would be payable under such award if all (or the highest level) of the
performance goals (and/or the other conditions) applicable to such award had
been met.
9.4 The Committee may also, in its discretion and on such conditions
as the Committee may determine, provide that any Performance Award may
contain the right to receive dividends payable with respect to the Common
Shares on which the award is based, an amount equivalent to such dividends,
or an amount determined by applying an interest rate or rates to the
principal amount of the award (and/or with respect to previously credited
dividends, dividend equivalent amounts, or interest amounts).
9.5 Each Performance Award granted under the Plan shall be evidenced
by a written agreement signed by the Committee or a representative thereof,
which agreement shall contain the terms and conditions of such award (as set
by the Committee).
9.6 Subject to the other provisions of the Plan, the Committee shall
establish procedures governing the payment of Performance Awards granted
under the Plan (and shall require under such procedures that any taxes
required to be withheld upon such payment be paid in full). Payment of any
amount to which a Participant is entitled under any Performance Award granted
under the Plan may be made in a lump sum or in installments, and, to the
extent a performance unit is involved, in cash, Common Shares or other
property, or a combination thereof, as the Committee shall determine in its
issuance of the award. Payment of any amount to which a Participant is
entitled under any performance share shall be made in Common Shares. To the
extent that payment is made in Common Shares or other property, the Common
Shares or other property shall be valued at its fair market value on the date
as of which the payment is determined.
10. FAIR MARKET VALUE OF COMMON SHARES AND PERFORMANCE GOALS.
10.1 For purposes of the Plan, the fair market value of a Common
Share on any date (for purposes only of this subsection 10.1, the "subject
date") shall be deemed to be the average of the high and low per share sale
prices of the Common Shares on the New York Stock Exchange on the subject
date (or, if the Common Shares were not traded on such exchange on the
subject date, the average of the high and low per share sale prices of the
Common Shares on the New York Stock Exchange on the latest preceding date on
which the Common Shares were traded); except that, if the Common Shares are
not listed on the New York Stock Exchange on the subject date (or, if the
subject date is not a business day of such exchange, on the next
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preceding business day of such exchange), then the fair market value of a
Common Share on the subject date shall be determined by the Committee in good
faith pursuant to methods and procedures established by the Committee.
10.2 To the extent the meeting of performance goals set by the
Committee may be a condition to the exercise of or payment under any award
granted under the Plan, the Committee may base such performance goals on, and
only on, one or more of the following criteria applicable to the Company and
its Subsidiaries: earnings before interest, taxes, depreciation, and
amortization; earnings per share; operating income; total shareholder
returns; cash generation targets; profit targets; revenue targets;
profitability targets as measured by return ratios; net income; return on
sales; return on assets; return on equity; and corporate performance
indicators (indices based on the level of certain services provided to
customers). Any such performance criteria shall be measured or determined on
the basis of a period of such duration (a "Performance Period"), which period
may be of any length, as is set by the Committee either prior to the start of
such period or within its first 90 days (provided that the performance
criteria is not in any event set after 25% or more of the applicable
Performance Period has elapsed) and shall be criteria that will be able to be
objectively determined by the Committee. In addition, any such performance
criteria (a) may be measured or determined for the Company, for any
Subsidiary of the Company, for the Company and all of the Company's
Subsidiaries in the aggregate, or for any group of corporations that are
included in the entire group of the Company and its Subsidiaries and (b) may
be measured and determined in an absolute sense and/or in comparison to the
analogous performance criteria of other publicly-traded companies (that are
selected for such comparison purposes by the Committee).
10.3 Further, to the extent any payment under, or any exercise of,
an award granted under the Plan requires the meeting of any performance goals
and/or any other conditions that have been set by the Committee, the
Committee shall verify that such performance goals and/or such other
conditions have been met before such payment or exercise is permitted.
11. NONASSIGNABILITY OF AWARDS.
Except as may be required by applicable law, no award granted under
the Plan may be assigned, transferred, pledged, or otherwise encumbered by a
Participant otherwise than by will, by designation of a beneficiary to take
effect after the Participant's death, or by the laws of descent and
distribution. Each award shall be exercisable during the Participant's
lifetime only by the Participant (or, if permissible under applicable law, by
the Participant's guardian or legal representative).
12. DEFERRALS OF AWARD PAYMENTS.
The Committee may, in its discretion, permit Participants to elect
to defer the payment otherwise required under all or part of any award
granted under the Plan in accordance with such terms and conditions as the
Committee shall establish.
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13. PROVISIONS UPON CHANGE IN CONTROL.
In the event of a Change in Control (as defined in subsection 13.4
below) occurring on or after the Effective Amendment Date, the provisions of
this Section 13 shall supersede any conflicting provisions of the Plan.
13.1 In the event of a Change in Control, all outstanding stock
options and SARs granted under the Plan shall become exercisable in full and
the restrictions still then in force and applicable to any Common Shares
awarded as restricted stock under the Plan shall lapse.
13.2 Further, unless the Committee shall revoke such an entitlement
prior to the occurrence of a Change in Control, a Participant who has been
awarded a stock option under the Plan and who is deemed by the Committee to
be an officer or other person subject to Section 16 (as in effect on the
Effective Amendment Date or as it may thereafter be amended or renumbered) of
the 1934 Act at the time of such Change in Control shall be entitled to
receive, in lieu of the exercise of any stock option or portion thereof to
the extent that it is then exercisable, a cash payment in an amount equal to
the difference between: (a) the aggregate fair market value, on the date
immediately after the date on which the Change in Control occurs, of the
Common Shares that are subject to such option or portion thereof (or, in the
event the Change in Control is effected by a tender offer or similar event,
the final offer price per share paid for Common Shares under the tender offer
or similar event times the number of Common Shares covered by such option or
portion thereof); and (b) the aggregate purchase price of the Common Shares
that are subject to such option or portion thereof. In the event the
applicable Change in Control is effected by a tender offer in which fewer
than all of the Common Shares which are validly tendered in compliance with
such offer are purchased or exchanged, then only that portion of the Common
Shares covered by a stock option granted under the Plan as results from
multiplying such Common Shares by a fraction, the numerator of which is the
number of Common Shares acquired pursuant to the offer and the denominator of
which is the number of Common Shares tendered in compliance with such offer,
shall be used to determine the payment thereupon. To the extent that all or
any portion of a stock option granted under the Plan shall be affected by
this provision, all or such portion of the stock option shall be terminated.
13.3 In the event of a Change in Control, a pro rata portion of all
still then outstanding Performance Awards granted under the Plan shall be
paid to each Participant within five business days after the date of such
Change in Control. The pro rata portion of any such award to be paid shall
equal the full present value of such award (determined as of the first day of
the month in which such Change in Control occurs under such interest rate and
other actuarial assumptions as are reasonably adopted by the Committee)
multiplied by a ratio, the numerator of which shall equal the number of full
and partial months (including the month in which the Change in Control
occurs) since the date of the award and the denominator of which shall equal
the number of months in the longest Performance Period applicable to any
performance goal on which such award is conditioned.
13.4 For the purpose of this Section 13, a "Change in Control" means
the occurrence of any one of the following events:
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(a) a majority of the Board as of any date is not composed
of Incumbent Directors. For purposes hereof, as of any date, the term
"Incumbent Director" means any individual who is a director of the Company as
of such date and either: (1) who was a director of the Company at the
beginning of the 24 consecutive month period ending on such date; or (2) who
became a director subsequent to the beginning of such 24 consecutive month
period and whose appointment, election, or nomination for election was
approved by a vote of at least two-thirds of the directors who were, as of
the date of such vote, Incumbent Directors (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named
as a nominee for director). It is PROVIDED, HOWEVER, that no individual
initially appointed, elected, or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors
or as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall ever be
deemed to be an Incumbent Director;
(b) any "person" (as such term is defined in Section
3(a)(9) of the 1934 Act) and as used in Sections 13(d)(3) and 14(d)(2) of the
1934 Act is or becomes a "beneficial owner" (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election of the Board (the
"Company Voting Securities"); PROVIDED, HOWEVER, that the event described in
this paragraph (b) shall not be deemed to be a Change in Control if such
event results from any of the following: (1) the acquisition of any Company
Voting Securities by the Company or any Subsidiary, (2) the acquisition of
any Company Voting Securities by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (3) the acquisition
of any Company Voting Securities by any underwriter temporarily holding
securities pursuant to an offering of such securities, or (4) a
Non-Qualifying Transaction (as defined in paragraph (c) of this subsection
13.4);
(c) the consummation of a merger, consolidation, statutory
share exchange, or similar form of corporate transaction involving the
Company or any Subsidiary (a "Reorganization") or sale or other disposition
of all or substantially all of the assets of the Company to an entity that is
not an affiliate of the Company (a "Sale"), that in each case requires the
approval of the Company's shareholders under the law of the Company's
jurisdiction of organization, whether for such Reorganization or Sale (or the
issuance of securities of the Company in such Reorganization or Sale), unless
immediately following such Reorganization or Sale: (1) more than 60% of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of (x) the
entity resulting from such Reorganization or the entity which has acquired
all or substantially all of the assets of the Company (in either case, the
"Surviving Entity"), or (y) if applicable, the ultimate parent entity that
directly or indirectly has beneficial ownership of more than 50% of the total
voting power (in respect of the election of directors, or similar officials
in the case of an entity other than a corporation) of the Surviving Entity
(the "Parent Entity"), is represented by Company Voting
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Securities that were outstanding immediately prior to such Reorganization or
Sale (or, if applicable, is represented by shares into which such Company
Voting Securities were converted pursuant to such Reorganization or Sale),
and such voting power among the holders thereof is in substantially the same
proportion as the voting power of such Company Voting Securities among the
holders thereof immediately prior to the Reorganization or Sale, (2) no
person (other than any employee benefit plan (or related trust) sponsored or
maintained by the Surviving Entity or the Parent Entity) is or becomes the
beneficial owner, directly or indirectly, of 20% or more of the total voting
power (in respect of the election of directors, or similar officials in the
case of an entity other than a corporation) of the outstanding voting
securities of the Parent Entity (or, if there is no Parent Entity, the
Surviving Entity), and (3) at least a majority of the members of the board of
directors (or similar officials in the case of an entity other than a
corporation) of the Parent Entity (or, if there is no Parent Entity, the
Surviving Entity) following the consummation of the Reorganization or Sale
were, at the time of the approval by the Board of the execution of the
initial agreement providing for such Reorganization or Sale, Incumbent
Directors (any Reorganization or Sale which satisfies all of the criteria
specified in (1), (2), and (3) of this paragraph (c) being deemed to be a
"Non-Qualifying Transaction"); or
(d) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any person acquires beneficial ownership of
more than 20% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of
Company Voting Securities outstanding; PROVIDED THAT, if after such
acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control shall then occur.
13.5 The provisions of this Section 13 may not be amended with
respect to any award granted to a Participant on or subsequent to the date
such award is granted if such amendment would be materially adverse to the
Participant without the consent of the Participant; provided, however, the
Board may still then make, without the Participant's consent, minor or
administrative changes to this Section 13 or changes to this Section 13 to
conform to applicable legal requirements that will apply to such award.
14. ADJUSTMENTS.
14.1 In the event of any change affecting the Common Shares by
reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares, or other
corporate change, or any distributions to common shareholders other than cash
dividends, the Committee shall make such substitution or adjustment in the
aggregate number or class of shares which may be distributed under the Plan
and in the number, class, and purchase price, grant price, or other price of
shares on which the outstanding awards granted under the Plan are based as it
reasonably determines to be appropriate in order to maintain the purposes of
the Plan and the then outstanding awards.
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14.2 The Committee shall be authorized to correct any defect, supply
any omission, or reconcile any inconsistency in the Plan or any award granted
under the Plan in the manner and to the extent it shall determine is needed
to reflect the intended provisions of the Plan or that award or to meet any
law that is applicable to the Plan (or the provisions of any law which must
be met in order for the normal tax consequences of the award to apply).
15. RIGHTS OF BOARD OF DIRECTORS.
15.1 Notwithstanding any other provision hereof to the contrary, the
Board may amend, alter, or discontinue the Plan or any portion or provision
thereof at any time, provided that no such action shall materially impair the
rights of a Participant with respect to a previously granted Plan award
without the Participant's consent. Notwithstanding the foregoing, the Board
may not in any event, without the approval of the Company's shareholders,
adopt an amendment to the Plan which shall: (a) increase the total number of
Common Shares reserved for issuance during the Remaining Period of the Plan;
(b) increase the total number of Common Shares which may be subject to ISOs
granted during the Remaining Period of the Plan; (c) change the class of
persons eligible to become Participants under the Plan; (d) make any change
in the Plan that is required by Section 162(m) (as in effect on the Effective
Amendment Date or as it may thereafter be amended or renumbered) of the Code
to be approved by the Company's shareholders in order to permit the Committee
the ability to have the amounts payable pursuant to any awards granted by it
under the Plan not be subject to the deduction limits of Section 162(m)(1)
(as in effect on the Effective Amendment Date or as it may thereafter be
amended or renumbered) of the Code by reason of Section 162(m)(4)(C) (as in
effect on the Effective Amendment Date or as it may thereafter be amended or
renumbered) of the Code; or (e) make any other change in the Plan that is
required by applicable law to be approved by the Company's shareholders in
order to be effective.
15.2 If approval of the Company's shareholders is required to a Plan
amendment pursuant to the provisions of subsection 15.1 above, then such
approval must be by the favorable vote of a majority of the outstanding stock
of the Company present, or represented, and entitled to vote at a meeting
duly held in accordance with the laws of the state in which the Company is
incorporated (or, to the extent applicable law requires a greater degree or
level of approval by the Company's shareholders in order for such amendment
to become effective, such approval must comply with such required degree or
level of approval).
16. PROCEDURES FOR SATISFYING PAYMENT AND WITHHOLDING REQUIREMENTS.
16.1 Subsections 6.5, 7.4, 8.3, and 9.6 above demand that the Committee
establish procedures governing the exercise of, lapse of restrictions under,
and/or payment of any award granted under the Plan and to compel under such
procedures that, to the extent applicable under such award, any purchase price
for Common Shares being obtained under such award and/or taxes required to be
withheld by the terms of such award or under applicable law (with any such
purchase price and/or tax withholding requirements being referred to in this
Section 16 as the "payment/withholding requirements") be paid in full. The
Committee may provide for different
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rules as to the satisfying of the payment/withholding requirements with
respect to each type of award granted under the Plan and even among awards of
the same type that are granted under the Plan. If any Participant (or other
person) who is responsible for satisfying any payment/withholding
requirements that apply to an award granted under the Plan otherwise fails to
satisfy such payment/withholding requirements, the Company shall have the
right to retain from such award or the payment thereof (or from any other
amount that is payable as compensation to the Participant or such other
person), as appropriate, a sufficient number of Common Shares or cash
otherwise applicable to the award (or otherwise applicable to such other
compensation amount) in order to satisfy such payment/withholding
requirements.
16.2 Without limiting the generality of the provisions of subsection
16.1 above, the following provisions may apply in connection with the
Committee's establishment of procedures governing the meeting of any
payment/withholding requirements that apply to an award granted under the
Plan:
(a) The Committee may, in its discretion and pursuant to
such conditions as the Committee decides to impose, provide that the
Participant to whom an award under the Plan is granted (or, if applicable,
such other person who is exercising or receiving a payment under the award)
may, in his or her sole discretion, satisfy the payment/withholding
requirements that apply to such award by using any one or more of the
following methods or any combination of the following methods: (1) by making
a payment to the Company of an amount in cash (which, for purposes of the
Plan, shall be deemed to include payment in U.S. currency or by personal
check, certified check, bank draft, cashier's check, or money order) equal to
the amount of such payment/withholding requirements, (2) by making a payment
to the Company in Common Shares which are previously owned by the Participant
(or such other person) and have a fair market value on the date of payment
equal to the amount of such payment/withholding requirements, (3) by having
the Company retain Common Shares which are being purchased under the award
and have a fair market value on the date of payment equal to the amount of
such payment/withholding requirements, (4) by having the Company retain an
amount of cash that is payable under the award and equal to the amount of
such payment/withholding requirements, and/or (5) by having the Company
retain an amount of cash that is payable under any other compensation
applicable to the Participant (or such other person) and equal to the amount
of such payment/withholding requirements.
(b) Notwithstanding the provisions of paragraph (a)
immediately above, Common Shares may not be used in payment by the
Participant for satisfying any payment/withholding requirements that apply to
an award granted under the Plan either (1) if the Common Shares being used in
payment either are being purchased upon exercise of the applicable award and
the award is an ISO or (2) if the Common Shares being used in payment both
were previously acquired by the Participant through the exercise of a prior
ISO and have been held by the Participant for less than two years from the
date of grant of the prior ISO or less than one year from the date of the
prior transfer of such Common Shares to him or her.
(c) Further, the procedures applicable to the satisfaction
of any payment/withholding requirements that apply to an award granted under
the Plan that are
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established by the Committee may, in the discretion of the Company, include
commonly accepted electronic or telephonic notices given via the internet or
an interactive voice response system to a third party broker which is
designated by the Company to facilitate and/or administer the exercise or
payment of any awards granted under the Plan.
17. MISCELLANEOUS.
17.1 Nothing contained in the Plan or any award granted under the
Plan shall confer on any Participant any right to be continued in the
employment of the Company or any Subsidiary of the Company or interfere in
any way with the right of the Company or any Subsidiary to terminate the
Participant's employment at any time and in the same manner as though the
Plan and any awards granted under the Plan were not in effect.
17.2 All payments required to be made under awards granted under the
Plan shall be made by the Company out of its general assets. In this regard,
the Plan shall not be funded and the Company shall not be required to
segregate any assets to reflect any awards granted under the Plan. Any
liability of the Company to any person with respect to any award granted
under the Plan shall be based solely upon the contractual obligations that
apply to such award, and no such liability shall be deemed to be secured by
any pledge of or other lien or encumbrance on any property of the Company.
17.3 Any payments or other benefits provided to a Participant with
respect to an award granted under the Plan shall not be deemed a part of the
Participant's compensation for purposes of any termination or severance pay
plan, or any other pension, profit sharing, or other benefit plan, of the
Company or any Subsidiary of the Company unless such plan expressly or
clearly indicates that the payments or other benefits provided under an award
granted under the Plan shall be considered part of the Participant's
compensation for purposes of such plan or unless applicable law otherwise
requires.
17.4 In no event shall the Company be obligated to issue or deliver
any Common Shares if and to the extent the Committee determines that such
issuance or delivery constitutes a violation of the provisions of any
applicable law (or regulation issued under such law) or the rules of any
securities exchange on which Common Shares are listed.
17.5 Except to the extent preempted by any applicable Federal law,
the Plan shall be subject to and construed in accordance with the laws of the
State of Ohio.
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IN ORDER TO EFFECT THE PROVISIONS OF THIS PLAN DOCUMENT, Broadwing
Inc., the sponsor of the Plan, has caused its name to be subscribed to this
Plan document this 9th day of August, 2000, to be effective as of July 24,
2000.
BROADWING INC.
By:__________________________________________
Richard G. Ellenberger
President and Chief Executive Officer
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